CNBC Daily Open: Fed rate cut path in sharp focus

Brendan Mcdermid | Reuters

This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Wall Street ends high
U.S. stocks ended on a positive note on Monday. The S&P 500 closed at a new record high as Wall Street looked ahead to Big Tech earnings and the Federal Reserve's rate policy decision. The Dow also closed higher, while the Nasdaq Composite saw the best performance of the three major indexes, up more than 1% in the session.

DOJ and SEC make cryptocurrency fraud charges
The Department of Justice and the Securities and Exchange Commission have unveiled charges in a $1.9 billion cryptocurrency fraud scheme known as HyperFund, among other names. Erek Barron, the U.S. attorney for Maryland, said, "The level of alleged fraud here is staggering."

Amazon axes iRobot  deal
Amazon said it would terminate a planned acquisition of vacuum-maker iRobot, with the two companies saying in a release there was "no path to regulatory approval for the deal." iRobot shares plunged as much as 10% on the news, before paring losses. 

Biden under pressure to strike Iran
President Joe Biden is facing pressure from Republicans in Congress to strike Iran after three U.S. troops were killed in Jordan in a drone strike claimed by the Islamic Resistance in Iraq, an Iranian-backed militia group. The deadly attack comes amid rising tensions in the Middle East since the latest Israel-Hamas war began in Oct. 7.

[PRO] Meta's pole position
Meta Platforms, will likely outshine the other so-called "Magnificent Seven" stocks during this earnings week, according to Altimeter Capital Chair and CEO Brad Gerstner. He is especially optimistic on Meta's artificial intelligence tools to boost monetization.

The bottom line

Wall Street is on Fed watch again.

The timing of interest rate cuts is certainly the top issue on the minds of most investors.

The market is widely expecting the central bank to keep rates unchanged at the Fed's two-day meeting, which ends Wednesday.

Still, investors are hoping the Fed will give strong signals on the path for interest rates, especially when they may be cut. 

Economists are currently split on the timing of rate cuts. Some expect the Fed to move as early as March, while others anticipate a rate cut sometime in May or June.

Recent good news on the economic front could influence the central bank's decision.

Inflation is certainly getting close to the Fed's 2% target rate. December's personal consumption expenditures price index, a key inflation gauge for the Fed, was published Friday. It rose 0.2% from the previous month and 2.9% on an annual basis.

On Thursday, a government report showed the U.S. economy grew at an accelerated pace in the final three months of 2023, capping the year on a solid note. 

Both data could possibly give the Fed a green light to start cutting interest rates later this year. Yet, the Fed could prefer to err on the side of caution and delay rate cuts as much as possible, until its confident inflation is firmly under control.

Let's hope the January policy meeting sheds more clarity on what direction the Fed decides to take.

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